In Search of a Shared National Narrative

Over the past two decades in America, the enduring, complicated divides of ideology, geography, party, class, religion, and race have created deep fractures in the United States, each side fighting to advance its own mythology and political interests. Of course, we all belong to groups, some as trivial as fans of the same music, some as significant as adherents to the same political party. Sectarianism helped early human beings survive by identifying outsiders and potential enemies, and it remains part of our core instinct. However, allegiance to country has in modern America transcended other loyalties to unite us around shared national narratives, events, and rituals. Although healthy nations may harbor substantial sectarianism, when loyalty to another faction outweighs loyalty to the national sect and national narrative, the political system has the potential to buckle and break.

We’ve seen these factional clusters deepen, harden, and separate, leading in turn to anger, misunderstanding, and hostility. Meanwhile, trust in institutions—government, business, the media, and higher education—continues to erode. Cultural warfare further splits our society, exposing fundamental differences about our views of justice and human nature. Unable to agree on first principles, we cannot agree on what it means to be American. As a result, we share few of the touchstones that, in the past, contributed to our national mythology. For instance, talk of the Thanksgiving holiday or Puritans now spawns debate over genocide of Native Americans. Talk of the Founding Fathers spurs reminders of the slave system they protected. Even the national anthem causes division in sports. As we disregard or dismantle these symbols and pastimes, thereby altering our national narrative, can we replace them with stories and rites to unite our various groups and maintain meaning in our American experiment?

Should loss of our former narratives concern us? Moving forward, can we recover or create a unifying national narrative? If so, what elements should that narrative comprise? And how should our story influence the wider world? Do the changes underway suggest an existing, common, national narrative as yet unarticulated? These questions prompted me to ask some of America’s leading thinkers for essays addressing our central issue—the unifying American story.

The contributors featured in Our American Story—leaders in their fields of history, law, politics, and public policy—approach the question from different angles. Even if searching for a common narrative risks neglecting some current or future group, we acknowledge that danger and still recognize the value of exploring whether a unifying story can be achieved and, if so, what that story may be.

This project, begun with an open-ended question, invites dramatically different takes. Contributions here range from skeptical to certain, from liberal to conservative, from abstract to personal. In a civic society immersed in echo chambers, one may be tempted to read only those contributions that affirming existing views. Avoid that temptation; instead, absorb and engage each approach. The diverse responses expand our possible narratives and remind us that, if a unifying story can be achieved at all, then more than one may be feasible or even necessary. If you insist on common threads or conclusions, then we leave them to you to discover, and we hope you find these contributions important and illuminating. Ultimately, I aim for this project to prompt much-needed conversation and reflection.

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Goldman Capitulates, Sees Full-Blown, Extended Trade War With Both China And Mexico

One of the most difficult things for a bank to admit is that its forecasts about the markets and economy have been wrong.

In recent weeks we have observed just this phenomenon, as one bank after another admitted their rates forecasts for 2019 were dead wrong (thanks to the resurgence of growth-sapping trade war), and the result has been a dramatic cutting in 10Y yield forecasts for the end of the year, which started with Bank of America two weeks ago when the bank admitted it was “unrealistically optimistic” ahead of coming “rate misery” when it cut its year-end 10Y yield forecast from 3.00% to 2.60%. Incidentally, today Bank of America was also one of the first to cut its year end S&P forecasts, stating that “we cut our 2019E EPS by 1.2% to $166 from $168 and 2020E EPS by 2.2% to $176 from $180, on renewed trade tensions between the US and China, plus new tariffs on Mexico. Increased China tariffs would lower the S&P’s EPS by an additional ~1% and tariffs on Mexico could represent a 0.6% drag in 2019, then -1.5% in 2020.”

In any case, at the time BofA cuts it rates forecast, we said that “now that BofA has thrown in the towel, expect the rest of Wall Street to do the same, admitting they too got absolutely everything wrong on the bond side.” Sure enough, today JPMorgan did just that when it said that it now sees 10-year Treasury yields at 1.75% at year-end, compared with 2.45% previously. The forecast for March is 1.65%. The bank also sees two-year yields at 1.40% in December and 1.30% in March, after the bank last week announced it now expects two rate cuts by the Fed before year end: one quarter point cut in September and December. Other banks have also piled on and Barclays notably now expecting no less than three rate cuts in the second half of the year.

Yet even as one after another Wall Street bank takes the machete to its forecasts, one bank has remained resolute in its projections, and despite the ongoing projection carnage, has refused to cut either its Fed rate forecast or its 10Y interest rate forecast.

That bank is Goldman Sachs, the same Goldman which we referenced last Friday when we said that “a financial cage match is forming between Goldman and JPMorgan”:

In the hawkish corner we have Goldman’s chief economist, Jan Hatzius who until very recently was expecting no rate cuts in the coming year, and in fact is anticipating the Fed will hike toward the end of 2020, arguably as a result of the upcoming inflationary spike as a result of trade war. In the dovish corner, we have JP Morgan which as of this morning has turned so bearish that the latest report from the bank’s chief economist, Michael Feroli, says that “Making Abysmal Growth Attainable” again would require not one but two rate cuts before the end of 2020!

But while Goldman stubbornly refuses to trim either its rate, market and GDP forecasts, today it made a small but notable adjustment to one of its core views: the bank’s heretofore optimistic take on how the trade war plays out.

Long story short, Goldman is no longer optimistic, and as Jan Hatzius writes, “we have revised our trade war assumptions and now expect a 10% tariff rate by July on both the final $300bn of Chinese imports (60% subjective odds) and on all Mexican products (70% odds for the first 5%, and just over 50% odds for the step-up to 10%). For China, this represents a middle ground between our previous assumption of a delay following the G20 summit in late June and the full 25% across-the-board tariff proposed by the US Trade Representative.”

First some more details on China:

New tariffs on all imports from China, some additional non-tariff restrictions, and no deal until late 2019…. While there is still a clear possibility that a meeting between Presidents Trump and Xi at the G20 summit on June 28-29 could avert further escalation, we believe the probability has risen that the next round of tariffs will take effect and we now view this as the base case (60% probability).

The probability of this next round has risen, in our view, because both sides continue to escalate the dispute with increasingly confrontational rhetoric and new forms of non-tariff retaliation. Moreover, while we believe that both sides would ultimately like to reach an agreement, neither side appears to be under much political pressure to do so at the moment. That said, we continue to expect that President Trump will want to announce some type of agreement with China to lower those tariffs by late 2019 or early 2020. This would allow consumers—and likely equity markets—to benefit prior to the 2020 presidential election.

How does trade war with China end?

It seems likely that by later this year both sides will become more interested in reaching an agreement as the economic and political costs of tariffs and other trade restrictions mount. We assume that the US and China will reach an   agreement late in 2019 that reduces—but probably does not eliminate—US tariffs in return for policy concessions from China. However, we do not expect that the US and China will conclude a far-reaching agreement, as had seemed likely only a few weeks ago. Indeed, even a deal later this year should not be expected to resolve all the differences between the two countries (and residual uncertainty is likely to remain about whether tariffs could be re-introduced at a later date).

Next, Goldman’s view on Mexican tariffs:

New tariffs on Mexico take effect temporarily but stop short of 25%. President Trump has proposed a 5% tariff on all goods entering the US from Mexico effective June 10. The tariff would increase by 5pp on July 1 and every month thereafter until it reaches 25%, where it would remain until the President determines that Mexico “substantially stops the illegal inflow of aliens coming through its territory.” According to the White House, avoiding the tariffs would require Mexico to secure the Mexico-Guatemala border, crack down on criminal organizations, and establish a “safe third country agreement” to prevent asylum seekers entering Mexico from claiming asylum in the US.

In light of the fact that these tariffs would take effect in less than 10 days and include a number of specific conditions, we believe it is fairly likely (70% probability) that at least the 5% tariff takes effect. That said, the President threatened another high-profile immigration-related action—closing the US-Mexico border—but never implemented it, raising the possibility that this might also be a false alarm. While this is clearly possible, we believe the proposed tariff is more likely to take effect since a 5% tariff would be less disruptive than a full border closing.

We believe it is a closer call as to whether the rate steps up to 10% on July 1, but see this as slightly more likely than not given the short time that Mexico would have to make reforms and the possibility that US-Mexico relations deteriorate once the first round of tariffs has taken effect, as occurred with US-China relations. However, we expect that tariff escalation would stop at 10% and that a resolution is likely to be reached in the next few months that would eliminate the tariff. We do not expect the US-Mexico-Canada Agreement (USMCA) to be ratified as long as this tariff is in effect .

At this stage, we believe the Mexican authorities want to engage and may not immediately retaliate. On the three main White House demands (secure the Mexico-Guatemala border, crack down on criminal organizations, and establish a “safe third country agreement”), we see scope for compromise as all three are issues that interest and benefit Mexican authorities as well (though progress on the third could be constrained by domestic politics and sensibilities).

But wait, there’s more: as Hatzius admits, “additional tariff rate increases or an across-the-board auto tariff are also possible but not our base case. We still expect deals with China and Mexico to lead to a removal of the tariffs, but not until late 2019/2020.”

Goldman’s various scenarios sumamarized visually:

In other words, expect a long and painful trade war which will conclude in early 2020 at the earliest.

What happens next? Here, as we observed most recently this morning, Goldman is confident that accelerating trade wars will impact prices, pushing them sharply higher, and in effect resulting in a stagflationary outcome, to wit:

The trade war is likely to become increasingly visible in the inflation numbers. Our new core PCE forecast incorporates a ½pp tariff boost and sees inflation climbing from 1.57% in April to 2% in August and to 2.3%-2.4% in early 2020, before diminishing under our assumption of tariff removal. If all proposed tariffs are implemented, we estimate a peak core inflation boost of +1¼pp.

So while Goldman expects cost-push (certainly not demand-pull) inflation to hit over the next 12 months, the bank notes that while growth effects are much less predictable, it still just took off a 0.5% from its previous 2.5% H2 GDP forecast, to wit:

“financial conditions have already tightened by about 50bp, and we attribute some of the weakness in the survey data in late May to the impact of the escalating trade war. On the back of these developments, we are lowering our H2 GDP forecast by about ½pp to 2%. We expect growth to rebound moderately in 2020 as tariffs come off and financial conditions stabilize.

Yet while Goldman was willing to admit it was wrong in its complacent outlook on trade war, it still remains stubborn in refusing to cut its Fed Funds rate forecast, even as all its peers are doing just that. Well, it may no tbe cutting it explicitly, but it sure is doing so as implicitly as it can, in a kinda, sorta way:

Because of the downside risks to growth, we have sharply raised our subjective probabilities for Fed rate cuts. But while it is a close call, the outlook has not yet changed enough for cuts to become our baseline forecast. So far, the FCI move has been far smaller than those of 2015-2016 and 2018, and while some further tightening is likely, we still don’t expect output and employment growth to fall below trend. With only a moderate tightening in financial conditions, still-decent growth, and inflation headed above 2%, cutting rates could look overly political in light of President Trump’s vocal demands for easier policy.

To be sure, what the Fed does next is without doubt the most important question: will Powell cut as a result of deflation, or will the rising price component of the upcoming stagflation be enough to pressure to Fed from cutting rates and in fact will the FOMC hike rates? Here is Goldman’s discussion on the topic:

There is no question that the probability of cuts in the remainder of 2019 has risen, owing to a combination of the tightening in financial conditions and the associated deterioration in the near-term growth outlook, continued below- target inflation, and increased acknowledgment on the Fed’s part—e.g. in Vice Chair Clarida’s speech last Thursday—that the risks are tilted toward cuts. We have therefore sharply lifted our subjective probabilities of cuts, for example raising our odds for Q3 and Q4 by 19pp each (to 28% and 31%). Our updated modal and expected funds rate paths are shown in Exhibit 9.

But while it is a close call, we have not yet seen enough of a change in the outlook to adopt a baseline expectation of rate cuts.

On the growth and employment side, even our revised forecast looks for growth slightly above trend and a mild downward trend in the unemployment rate as the drag from financial conditions gradually diminishes and the strength of household demand offsets the weakness in business investment. The main reason for these relatively limited changes is that financial conditions have only tightened moderately so far. Admittedly, part of this relative reflects the 50bp rally in the bond market over the past three months, which in turn is partly predicated on the expectation of Fed easing. So a decision by the FOMC not to deliver on this expectation could result in further FCI tightening.

Meanwhile, on the inflation side, we share Chair Powell’s view expressed at the May 1 FOMC press conference that the current weakness in the PCE ex food and energy is largely temporary. In fact, the most recent data have reinforced this view. The PCE ex food and energy rose a firm 0.247% in April and the Dallas Fed’s trimmed-mean PCE index showed its largest month-to-month increase of the entire expansion and now stands at a year-on-year rate of just over 2.0%, as illustrated in Exhibit 10. The news on household inflation expectations has also been fairly solid, with a rise in the University of Michigan’s 5-10 year consumer measure in May to 2.6%, the top end of the range seen in the past three years. Combined with the prospective tariff impact, these signals increase our confidence that the PCE ex food and energy measure will indeed rise above 2% by early 2020.

So our baseline is still one in which unemployment moves sideways or lower from levels that are already below the FOMC’s estimate of the sustainable rate, while inflation is above the 2% target. If this forecast is correct, a decision to cut on the basis of a relatively limited tightening in financial conditions might well look overly political in light of President Trump’s vocal demands for easier policy. Since Fed officials must think not just about near-term risk management but also about the longer-term credibility and political independence of the institution, this might be another reason to resist  cuts, barring a bigger shift in the outlook for employment and inflation.

So after that lengthy apology that it had been largely wrong about much if not all, and cognizant that it will likely continue to be wrong in a world in which the market and economy flip by 180 degrees depending on what Trump may tweet at any given moment, Goldman warns that it will probably be wrong yet again:

There are several ways in which our decision to buck the trend toward forecasting rate cuts could prove ill-advised. Perhaps the slowdown in some of the May business surveys sets the stage for a sharp deterioration in the first-tier ISM and employment releases in the coming week. Perhaps the weakness in the PCE ex food and energy will persist for one reason or another. And most importantly, perhaps the US-China escalation will continue until the impact on business confidence and financial conditions is sufficiently severe to force a change, including in the FOMC’s policy.

The bank’s conclusion: “we will continue to evaluate our view in light of changes in the economic data, the policy environment, and financial conditions, and make changes as appropriate.” And since these days Goldman is best known for abusing its clients’ balance sheet as it unloads existing positions before taking the other side of whatever trade it is recommending via its public-facing research, once Goldman does reverse and predicts rate cuts, that will be the sign that the bottom is once again in.

via ZeroHedge News http://bit.ly/2Mrqbkw Tyler Durden

Justin Amash and Rand Paul Disagree About Impeachment, but Fight Together for Federal Surveillance Reform

Two libertarian-leaning conservatives, Rep. Justin Amash (R–Mich.) and Sen. Rand Paul (R–Ky.), have been working together for the past six years attempting to restrain the government’s power to snoop on citizens without a warrant. But the two have found themselves on opposite sides in their interpretations of the investigation of President Donald Trump and his campaign team, on whether there were political motivations behind the then-secret surveillance, and on how that should inform our thoughts about whether Trump has committed impeachable offenses.

Amash has famously come forward as the only Republican in Congress willing to publicly consider impeachment. Paul is opposed to impeaching Trump, and his opposition is partly rooted in his concerns that the Trump investigation has politicized roots and is not solely an effort to root out possible corrupt relationships with Russia or other countries.

The two men’s differences have been presented as a potential significant rift or conflict. Last week on Fox News, Paul expressed his disagreement with Amash’s position. Fox headlined the coverage, “Rand Paul on fellow libertarian Amash’s impeachment call: Russia probe was ‘un-libertarian.'” The implication was that if one were a libertarian, one would have been opposed to the Russia probe, and therefore subsequently against the possibility of impeaching Trump.

But Paul was actually very careful and nuanced in how he discussed the surveillance and the investigation in the Fox appearance. And he didn’t attacking Amash so much as explain why he sees the situation differently. What he’s describing as un-libertarian is the “feel” of the investigation: “You have an intelligence community that has so much power that many libertarians have said, ‘Gosh, this much power could be abused.’ And when I look at it I see abusive power from Comey, from Clapper, from Brennan, from all these guys…who took this great power we’ve entrusted in them to spy on foreigners and they directed it against Americans for partisan reasons…”

It’s interesting that the example of bad surveillance Paul provides in this interview is not the wiretapping of former Trump aide Carter Page but that of Gen. Michael Flynn, Trump’s former national security advisor, whose phone conversations with Russian ambassador Sergey Kislyak had been picked up by the FBI just a couple of months before Trump was to take office.

Why does it matter if Paul talks about Flynn rather than Page, when part of the Republican defense of Trump has been characterizing the surveillance of Page as illegal or somehow invalid? Page was never charged with a crime. Flynn, on the other hand, has pleaded guilty to making false statements to the FBI about those conversations with Kislyak.

It matters because so much of the reform effort that Amash and Paul have pushed forward has focused on the unwarranted surveillance of American citizens by the federal government. The FBI got a warrant to wiretap Page; the debate there is whether its agents had properly disclosed to the Foreign Intelligence Surveillance Court relevant information about the controversial Steele dossier. There was no warrant with Flynn, and that’s why Paul focuses on him.

In Flynn’s case, this is because he wasn’t actually the initial target of the surveillance. Under the Foreign Intelligence Surveillance Act, the FBI and the National Security Agency are able to wiretap foreign officials without having to get a warrant. They don’t have the same level of surveillance protections that Americans get.

What can happen, is in Flynn’s case, is that the FBI listens in when a foreign official has a conversation with an American citizen, and then everything gets complicated. There are supposed to be strict guidelines on minimizing access to this information and controls over who is allowed to view info incidentally collected about Americans this way. There have been serious concerns about what are called “backdoor” searches, where the FBI uses this information—intended to investigate espionage actions and terrorist plots—as evidence for completely unrelated domestic crimes. And right as Obama was leaving office, he loosened the rules for secret information sharing within departments of the executive branch.

My point is that Paul is expressing his disagreement with Amash in a way that nevertheless keeps the focus on policy shifts that they both share. They both want to restrain the ability of the federal government to spy on Americans without warrants.

What’s different here is that, unlike Amash, Paul has the president’s ear. This is not to say that I think Paul’s position is calculated or insincere or that Paul’s support of Trump is dependent on access. But in this same Fox interview, Paul notes that he had just spoken with Trump himself. He is using Trump’s anger at this surveillance to try to convince the president to permit important policy changes that would reduce the FBI’s authority to access information collected from Americans’ communications without getting a warrant.

In the end, Paul is trying to push through much-needed surveillance reforms in an administration that, despite all its screaming about snooping, has resisted any scaling back of domestic surveillance and has, in fact, expanded it.

So Amash and Paul have come to differing conclusions about how to interpret the information of the special counsel Robert Mueller’s report and what next steps to take. But there’s more to politics and policy than whether or not to impeach Trump (believe it or not), and despite what seems like a huge disagreement, the two of them still do not seem that far apart.

Bonus link: At the Washington ExaminerJack Hunter looks at both Amash’s and Paul’s positions and, like me, doesn’t necessarily think one of them has to be wrong.

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Justin Amash and Rand Paul Disagree About Impeachment, but Fight Together for Federal Surveillance Reform

Two libertarian-leaning conservatives, Rep. Justin Amash (R–Mich.) and Sen. Rand Paul (R–Ky.), have been working together for the past six years attempting to restrain the government’s power to snoop on citizens without a warrant. But the two have found themselves on opposite sides in their interpretations of the investigation of President Donald Trump and his campaign team, on whether there were political motivations behind the then-secret surveillance, and on how that should inform our thoughts about whether Trump has committed impeachable offenses.

Amash has famously come forward as the only Republican in Congress willing to publicly consider impeachment. Paul is opposed to impeaching Trump, and his opposition is partly rooted in his concerns that the Trump investigation has politicized roots and is not solely an effort to root out possible corrupt relationships with Russia or other countries.

The two men’s differences have been presented as a potential significant rift or conflict. Last week on Fox News, Paul expressed his disagreement with Amash’s position. Fox headlined the coverage, “Rand Paul on fellow libertarian Amash’s impeachment call: Russia probe was ‘un-libertarian.'” The implication was that if one were a libertarian, one would have been opposed to the Russia probe, and therefore subsequently against the possibility of impeaching Trump.

But Paul was actually very careful and nuanced in how he discussed the surveillance and the investigation in the Fox appearance. And he didn’t attacking Amash so much as explain why he sees the situation differently. What he’s describing as un-libertarian is the “feel” of the investigation: “You have an intelligence community that has so much power that many libertarians have said, ‘Gosh, this much power could be abused.’ And when I look at it I see abusive power from Comey, from Clapper, from Brennan, from all these guys…who took this great power we’ve entrusted in them to spy on foreigners and they directed it against Americans for partisan reasons…”

It’s interesting that the example of bad surveillance Paul provides in this interview is not the wiretapping of former Trump aide Carter Page but that of Gen. Michael Flynn, Trump’s former national security advisor, whose phone conversations with Russian ambassador Sergey Kislyak had been picked up by the FBI just a couple of months before Trump was to take office.

Why does it matter if Paul talks about Flynn rather than Page, when part of the Republican defense of Trump has been characterizing the surveillance of Page as illegal or somehow invalid? Page was never charged with a crime. Flynn, on the other hand, has pleaded guilty to making false statements to the FBI about those conversations with Kislyak.

It matters because so much of the reform effort that Amash and Paul have pushed forward has focused on the unwarranted surveillance of American citizens by the federal government. The FBI got a warrant to wiretap Page; the debate there is whether its agents had properly disclosed to the Foreign Intelligence Surveillance Court relevant information about the controversial Steele dossier. There was no warrant with Flynn, and that’s why Paul focuses on him.

In Flynn’s case, this is because he wasn’t actually the initial target of the surveillance. Under the Foreign Intelligence Surveillance Act, the FBI and the National Security Agency are able to wiretap foreign officials without having to get a warrant. They don’t have the same level of surveillance protections that Americans get.

What can happen, is in Flynn’s case, is that the FBI listens in when a foreign official has a conversation with an American citizen, and then everything gets complicated. There are supposed to be strict guidelines on minimizing access to this information and controls over who is allowed to view info incidentally collected about Americans this way. There have been serious concerns about what are called “backdoor” searches, where the FBI uses this information—intended to investigate espionage actions and terrorist plots—as evidence for completely unrelated domestic crimes. And right as Obama was leaving office, he loosened the rules for secret information sharing within departments of the executive branch.

My point is that Paul is expressing his disagreement with Amash in a way that nevertheless keeps the focus on policy shifts that they both share. They both want to restrain the ability of the federal government to spy on Americans without warrants.

What’s different here is that, unlike Amash, Paul has the president’s ear. This is not to say that I think Paul’s position is calculated or insincere or that Paul’s support of Trump is dependent on access. But in this same Fox interview, Paul notes that he had just spoken with Trump himself. He is using Trump’s anger at this surveillance to try to convince the president to permit important policy changes that would reduce the FBI’s authority to access information collected from Americans’ communications without getting a warrant.

In the end, Paul is trying to push through much-needed surveillance reforms in an administration that, despite all its screaming about snooping, has resisted any scaling back of domestic surveillance and has, in fact, expanded it.

So Amash and Paul have come to differing conclusions about how to interpret the information of the special counsel Robert Mueller’s report and what next steps to take. But there’s more to politics and policy than whether or not to impeach Trump (believe it or not), and despite what seems like a huge disagreement, the two of them still do not seem that far apart.

Bonus link: At the Washington ExaminerJack Hunter looks at both Amash’s and Paul’s positions and, like me, doesn’t necessarily think one of them has to be wrong.

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The New Theocrats Are Neither Conservative Nor Christian

When you’re a practicing Catholic, the world loves to challenge your faith. Some want to know why you worship Mary, the mother of Jesus. Others want to know why you hate gay people. And everyone, sooner or later, wants you to answer for the Crusades.

The answer to those first two charges is straightforward: We don’t. But questions about the Church’s actions during the Middle Ages (which also include the conversion of Europe to Christianity and, later, the Inquisition) can be trickier. In general, there are three directions you could go with your reply.

One is to plead sinfulness mitigated by progress. There are many things in the Church’s history we aren’t proud of, you might say, but magisterial teachings today are clear and categorical: We no longer wage holy wars, and forced conversions are a thing of the past.

A second option is to argue that the question gets the history wrong. The Crusades were a response to a positive threat from Islamic tribes and nations whose goal was to replace Christianity, militarily if need be. They were largely defensive, in other words, and therefore just.

Finally, you could claim that even nondefensive violence can be legitimate when employed for noble ends. The Church has a commission to spread salvation, after all; stamping out heresy is part of the bargain, as is ensuring that Christians are obediently practicing the faith.

It’s rare these days to find someone who would make the third case—but perhaps not as rare as you would expect. A small but increasingly vocal cohort of traditionalist Catholics do appear to believe that the state should play a role in enforcing Church teachings—including, it would seem, against non-Catholics. Until now, that’s been something of a fringe position within the conservative movement. But 2019 may be remembered as the year theocracy went mainstream.

***

Last week, the Catholic convert and New York Post opinion editor Sohrab Ahmari published a long essay at First Things demanding that conservatives abandon their commitments to tolerance and civility. Instead, Ahmari wants his side to “fight the culture war with the aim of defeating the enemy and enjoying the spoils in the form of a public square re-ordered to the common good and ultimately the Highest Good.” Bizarrely, he takes National Review‘s David French, a civil libertarian former litigator, as the face of the old, soft conservatism at which his guns are aimed.

While it’s lamentably thin on specifics, the guiding principle behind the Ahmari program is clear: Americans have become an immoral people—unchurched, “pornographized,” overly consumerist, and insufficiently loyal to our fellow countrymen—and government force needs to be employed to correct them. That second point is key: The problem with “French-ism,” Ahmari writes, is its “great horror of the state, of traditional authority and the use of the public power to advance the common good, including in the realm of public morality.”

To say the First Things essay has been controversial would be to miss its significance as a watershed for the American right, where an internecine conflict has been brewing for some time. Much of the response to Ahmari has focused on his denunciation of French for being overly polite toward those with whom he disagrees. But the real issue is substantive, not stylistic: It’s a schism between people who want to use the law to forcibly restore America’s Judeo-Christian character and those who don’t.

Catholic integralism—the idea that Church teachings should guide public policy—is not new. Ahmari doesn’t label his anti-Frenchist alternative as integralist, though he isn’t far off when he says the political right should be willing to use politics “to enforce our order and our orthodoxy.” But mostly he speaks of orienting society to the common good. Who could be against that?

The problem hardly needs stating: What is meant by the common good? Progressives too believe their policies are morally correct—hence the common refrain that it’s just wrong for bakers and florists to refuse to provide their services for gay weddings. And the disagreement isn’t only between partisans of the left and right. The fiercest culture wars are playground disputes compared to the actual wars that have been fought over doctrinal differences among conservative Christians.

I want to be very clear: To observe that not everyone shares a common sense of the common good is not to deny the existence of an objective good, or even a deeply orthodox understanding of it. I grieve the scourge of abortion, the breakdown of the traditional family, the declining religiosity of the developed world. And pace many of my fellow libertarians, I do not see in the sexual revolution an unalloyed positive. I’m a young single Catholic woman. The erosion of traditional norms around courtship has been profoundly bad for me on a personal level. You try getting a date in Washington, D.C., when you’re on the record supporting Humanae Vitae

All of which is to say that I am not arguing from libertinism here. I’m pointing out that, absent universal agreement about the common good, an integralist governing regime necessarily means imposing one group’s moral vision on unwilling others. Ahmari is contemptuous of the Frenchian notion that cultural change is the answer to this quandary, but force exercised without popular backing is tyranny by definition.

***

In 2006, First Things ran a 6,000-word book review in which future New York Times columnist Ross Douthat eviscerated claims that “twenty-first-century America is slouching toward theocracy.” If the religious right were to get its way, one worried left-wing author had predicted, public employees “would be required to participate in weekly Bible classes in the workplace,” homosexuality would be criminalized, “the mainstream press and the electronic media would be beaten into submission,” and more. Douthat wryly noted that the book lacked “examples of significant political actors who are proposing taking any of these steps, let alone all of them.”

He continued:

Did Billy Graham once advise evangelicals to run for public office and take “control” of the various branches for government? Then he must believe, with the Reconstructionists, that “all adversaries must be completely eliminated from positions of authority” and that “to achieve a divine end by any means—including cruelty, deception, and brute force—is justified.” Did Antonin Scalia suggest that government “derives its moral authority from God”? Well, he doubtless intended to issue “a legal green light” to theocrats seeking “to destroy all existing political systems…and replace them with their own religion-soaked political regimes.”

Today, the same journal that published Douthat mocking America’s paranoid anti-theocrats features an essay holding out as the ultimate betrayal the fact that French thinks it would probably be a mistake to ban porn or to give federal officials control over private social media companies’ terms of service.

In the George W. Bush era, a simple biblical allusion in a presidential address—a reference to the log in your own eye and the speck in your neighbor’s, say—would be interpreted by commentators as a fundamentalist “dog whistle” portending an imminent theocratic takeover. Needless to say, the idea was absurd. Sure, politicians on the right more forcefully advocated for certain socially conservative causes back then, but the public more forcefully supported those causes as well.

There’s a world of difference between any of that and a conservative thought leader openly telling his allies that they’d better get comfortable treating “politics as war and enmity” because the other side will always be better “at winning in the realm of culture.” Stop for a moment and compare what Douthat viewed as comically overwrought language in the quote above to Ahmari’s assertion that “progressives understand that culture war means discrediting their opponents and weakening or destroying their institutions. Conservatives should approach the culture war with a similar realism.”

I bring up Douthat in part because I worry folks like him might be susceptible to the allure of what Ahmari is offering: a righteous-sounding excuse to give in to the same kind of base temptation that makes you wish, upon encountering a world-class jerk, that you could pop him in the face. You restrain yourself because you know that physical violence is not an appropriate response to rude words…even if you’re a little bit rueful about it.

Likewise, Christian traditionalists have mostly internalized the maxim, rightly bound up with the conservative tradition for many years, that you can’t impose faith and morals by government fiat. However much Douthat and others might wish they could use the force of law to roll back the worst of modernity’s blunders, to do so would be to prove the anti-theocrats right. Ahmari wants them to remember that desperate times call for desperate measures. The devil usually tells us we’re saving others’ souls when he’s trying to convince us to sell our own.

***

In the last few years, the American left has embraced an increasingly illiberal progressivism—that is, a political and social program that stands opposed to the “classical liberal” project.

Classical liberalism privileges individual liberty, correctly understood as freedom from coercion and aggression, by championing things like free expression, due process, and the relatively unencumbered movement of goods and people. The ascendant progressivism, on the other hand, has no qualms about infringing people’s liberty in order to advance its own moral agenda. Socialists seek to command people’s behavior in the economic sphere, while social justice warriors try to impose rightthink on matters of culture. It’s not enough that same-sex and opposite-sex couples receive equal treatment under the law, the left now says; the state must compel Christian business owners to participate in gay weddings or be driven from the marketplace.

Ahmari also wishes to use government power to constrain people’s freedom. Thus, he is advocating an illiberal conservatism—a rejection of the right’s longstanding fusion of social traditionalism with staunch respect for individual rights.

My colleague Robby Soave and countless others have already pointed out that this would be a catastrophic unforced political error on the part of conservatives. Classical liberal values and institutions offer a robust bulwark against the worst excesses of the illiberal left. Do Ahmari et al. actually think the system that gave us the Burwell v. Hobby Lobby ruling is so broken as to justify setting the whole thing ablaze? More to the point, do they really believe that what follows after the smoke clears will be better for religious traditionalists?

But the First Thingsian rejection of the liberal order isn’t merely strategically imprudent. It’s morally reprehensible from a Catholic perspective. The dignity of the human person, which follows from our being created by God in His image and likeness, demands that we be given expansive freedom to make choices for ourselves.

That’s not libertarian propaganda. It comes straight out of the Catechism (“God created man a rational being, conferring on him the dignity of a person who can initiate and control his own actions”), which in turn quotes the Bible (“God willed that man should be ‘left in the hand of his own counsel,’ so that he might of his own accord seek his Creator and freely attain his full and blessed perfection by cleaving to him”). As the economist Eric Schansberg once wrote of Adam and Eve, “It was not God’s plan that they should sin, but it was God’s will that they should have the choice.” To exercise coercive control over a person is to treat him as undeserving of a gift bestowed by his creator. It’s to place yourself above your creator. 

The new illiberal conservatives like to paint the Reason set as moral-relativist libertines. But as I’ve pointed out at length elsewhere,

libertarians see the human person as worthy of respect. For the most part, they do not recognize the deeper truth: that this is so because we are made by God in his image and are incomparably valuable to him. But in a real sense, without meaning to, libertarianism takes that idea more seriously than most other political philosophies.

There’s nothing Christian about the idea that we should hope not to convert or persuade but to defeat and destroy our ideological opponents. To gain the whole world and lose your soul is no victory at all.

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The New Theocrats Are Neither Conservative Nor Christian

When you’re a practicing Catholic, the world loves to challenge your faith. Some want to know why you worship Mary, the mother of Jesus. Others want to know why you hate gay people. And everyone, sooner or later, wants you to answer for the Crusades.

The answer to those first two charges is straightforward: We don’t. But questions about the Church’s actions during the Middle Ages (which also include the conversion of Europe to Christianity and, later, the Inquisition) can be trickier. In general, there are three directions you could go with your reply.

One is to plead sinfulness mitigated by progress. There are many things in the Church’s history we aren’t proud of, you might say, but magisterial teachings today are clear and categorical: We no longer wage holy wars, and forced conversions are a thing of the past.

A second option is to argue that the question gets the history wrong. The Crusades were a response to a positive threat from Islamic tribes and nations whose goal was to replace Christianity, militarily if need be. They were largely defensive, in other words, and therefore just.

Finally, you could claim that even nondefensive violence can be legitimate when employed for noble ends. The Church has a commission to spread salvation, after all; stamping out heresy is part of the bargain, as is ensuring that Christians are obediently practicing the faith.

It’s rare these days to find someone who would make the third case—but perhaps not as rare as you would expect. A small but increasingly vocal cohort of traditionalist Catholics do appear to believe that the state should play a role in enforcing Church teachings—including, it would seem, against non-Catholics. Until now, that’s been something of a fringe position within the conservative movement. But 2019 may be remembered as the year theocracy went mainstream.

***

Last week, the Catholic convert and New York Post opinion editor Sohrab Ahmari published a long essay at First Things demanding that conservatives abandon their commitments to tolerance and civility. Instead, Ahmari wants his side to “fight the culture war with the aim of defeating the enemy and enjoying the spoils in the form of a public square re-ordered to the common good and ultimately the Highest Good.” Bizarrely, he takes National Review‘s David French, a civil libertarian former litigator, as the face of the old, soft conservatism at which his guns are aimed.

While it’s lamentably thin on specifics, the guiding principle behind the Ahmari program is clear: Americans have become an immoral people—unchurched, “pornographized,” overly consumerist, and insufficiently loyal to our fellow countrymen—and government force needs to be employed to correct them. That second point is key: The problem with “French-ism,” Ahmari writes, is its “great horror of the state, of traditional authority and the use of the public power to advance the common good, including in the realm of public morality.”

To say the First Things essay has been controversial would be to miss its significance as a watershed for the American right, where an internecine conflict has been brewing for some time. Much of the response to Ahmari has focused on his denunciation of French for being overly polite toward those with whom he disagrees. But the real issue is substantive, not stylistic: It’s a schism between people who want to use the law to forcibly restore America’s Judeo-Christian character and those who don’t.

Catholic integralism—the idea that Church teachings should guide public policy—is not new. Ahmari doesn’t label his anti-Frenchist alternative as integralist, though he isn’t far off when he says the political right should be willing to use politics “to enforce our order and our orthodoxy.” But mostly he speaks of orienting society to the common good. Who could be against that?

The problem hardly needs stating: What is meant by the common good? Progressives too believe their policies are morally correct—hence the common refrain that it’s just wrong for bakers and florists to refuse to provide their services for gay weddings. And the disagreement isn’t only between partisans of the left and right. The fiercest culture wars are playground disputes compared to the actual wars that have been fought over doctrinal differences among conservative Christians.

I want to be very clear: To observe that not everyone shares a common sense of the common good is not to deny the existence of an objective good, or even a deeply orthodox understanding of it. I grieve the scourge of abortion, the breakdown of the traditional family, the declining religiosity of the developed world. And pace many of my fellow libertarians, I do not see in the sexual revolution an unalloyed positive. I’m a young single Catholic woman. The erosion of traditional norms around courtship has been profoundly bad for me on a personal level. You try getting a date in Washington, D.C., when you’re on the record supporting Humanae Vitae

All of which is to say that I am not arguing from libertinism here. I’m pointing out that, absent universal agreement about the common good, an integralist governing regime necessarily means imposing one group’s moral vision on unwilling others. Ahmari is contemptuous of the Frenchian notion that cultural change is the answer to this quandary, but force exercised without popular backing is tyranny by definition.

***

In 2006, First Things ran a 6,000-word book review in which future New York Times columnist Ross Douthat eviscerated claims that “twenty-first-century America is slouching toward theocracy.” If the religious right were to get its way, one worried left-wing author had predicted, public employees “would be required to participate in weekly Bible classes in the workplace,” homosexuality would be criminalized, “the mainstream press and the electronic media would be beaten into submission,” and more. Douthat wryly noted that the book lacked “examples of significant political actors who are proposing taking any of these steps, let alone all of them.”

He continued:

Did Billy Graham once advise evangelicals to run for public office and take “control” of the various branches for government? Then he must believe, with the Reconstructionists, that “all adversaries must be completely eliminated from positions of authority” and that “to achieve a divine end by any means—including cruelty, deception, and brute force—is justified.” Did Antonin Scalia suggest that government “derives its moral authority from God”? Well, he doubtless intended to issue “a legal green light” to theocrats seeking “to destroy all existing political systems…and replace them with their own religion-soaked political regimes.”

Today, the same journal that published Douthat mocking America’s paranoid anti-theocrats features an essay holding out as the ultimate betrayal the fact that French thinks it would probably be a mistake to ban porn or to give federal officials control over private social media companies’ terms of service.

In the George W. Bush era, a simple biblical allusion in a presidential address—a reference to the log in your own eye and the speck in your neighbor’s, say—would be interpreted by commentators as a fundamentalist “dog whistle” portending an imminent theocratic takeover. Needless to say, the idea was absurd. Sure, politicians on the right more forcefully advocated for certain socially conservative causes back then, but the public more forcefully supported those causes as well.

There’s a world of difference between any of that and a conservative thought leader openly telling his allies that they’d better get comfortable treating “politics as war and enmity” because the other side will always be better “at winning in the realm of culture.” Stop for a moment and compare what Douthat viewed as comically overwrought language in the quote above to Ahmari’s assertion that “progressives understand that culture war means discrediting their opponents and weakening or destroying their institutions. Conservatives should approach the culture war with a similar realism.”

I bring up Douthat in part because I worry folks like him might be susceptible to the allure of what Ahmari is offering: a righteous-sounding excuse to give in to the same kind of base temptation that makes you wish, upon encountering a world-class jerk, that you could pop him in the face. You restrain yourself because you know that physical violence is not an appropriate response to rude words…even if you’re a little bit rueful about it.

Likewise, Christian traditionalists have mostly internalized the maxim, rightly bound up with the conservative tradition for many years, that you can’t impose faith and morals by government fiat. However much Douthat and others might wish they could use the force of law to roll back the worst of modernity’s blunders, to do so would be to prove the anti-theocrats right. Ahmari wants them to remember that desperate times call for desperate measures. The devil usually tells us we’re saving others’ souls when he’s trying to convince us to sell our own.

***

In the last few years, the American left has embraced an increasingly illiberal progressivism—that is, a political and social program that stands opposed to the “classical liberal” project.

Classical liberalism privileges individual liberty, correctly understood as freedom from coercion and aggression, by championing things like free expression, due process, and the relatively unencumbered movement of goods and people. The ascendant progressivism, on the other hand, has no qualms about infringing people’s liberty in order to advance its own moral agenda. Socialists seek to command people’s behavior in the economic sphere, while social justice warriors try to impose rightthink on matters of culture. It’s not enough that same-sex and opposite-sex couples receive equal treatment under the law, the left now says; the state must compel Christian business owners to participate in gay weddings or be driven from the marketplace.

Ahmari also wishes to use government power to constrain people’s freedom. Thus, he is advocating an illiberal conservatism—a rejection of the right’s longstanding fusion of social traditionalism with staunch respect for individual rights.

My colleague Robby Soave and countless others have already pointed out that this would be a catastrophic unforced political error on the part of conservatives. Classical liberal values and institutions offer a robust bulwark against the worst excesses of the illiberal left. Do Ahmari et al. actually think the system that gave us the Burwell v. Hobby Lobby ruling is so broken as to justify setting the whole thing ablaze? More to the point, do they really believe that what follows after the smoke clears will be better for religious traditionalists?

But the First Thingsian rejection of the liberal order isn’t merely strategically imprudent. It’s morally reprehensible from a Catholic perspective. The dignity of the human person, which follows from our being created by God in His image and likeness, demands that we be given expansive freedom to make choices for ourselves.

That’s not libertarian propaganda. It comes straight out of the Catechism (“God created man a rational being, conferring on him the dignity of a person who can initiate and control his own actions”), which in turn quotes the Bible (“God willed that man should be ‘left in the hand of his own counsel,’ so that he might of his own accord seek his Creator and freely attain his full and blessed perfection by cleaving to him”). As the economist Eric Schansberg once wrote of Adam and Eve, “It was not God’s plan that they should sin, but it was God’s will that they should have the choice.” To exercise coercive control over a person is to treat him as undeserving of a gift bestowed by his creator. It’s to place yourself above your creator. 

The new illiberal conservatives like to paint the Reason set as moral-relativist libertines. But as I’ve pointed out at length elsewhere,

libertarians see the human person as worthy of respect. For the most part, they do not recognize the deeper truth: that this is so because we are made by God in his image and are incomparably valuable to him. But in a real sense, without meaning to, libertarianism takes that idea more seriously than most other political philosophies.

There’s nothing Christian about the idea that we should hope not to convert or persuade but to defeat and destroy our ideological opponents. To gain the whole world and lose your soul is no victory at all.

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via IFTTT

Elizabeth Warren’s Budget Math Still Doesn’t Work

On the campaign trail, Sen. Elizabeth Warren (D–Mass.) is promising voters that she “has a plan for that“—no matter what “that” is.

But her plans don’t add up.

Take Warren’s appearance last week on The View, where she overestimated the number of programs she could fund with her proposed wealth tax of 2 percent on personal net worth over $50 million dollars and 3 percent on net worth over $1 billion. Warren name-checked her student loan forgiveness and tuition-free college plan, her childcare plan, and a proposal to increase teacher pay as programs she’d fund with the wealth tax.  

According to University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman, Warren’s wealth tax would raise $2.75 trillion dollars over the next decade.

Warren’s student loan forgiveness and tuition-free college plan would forgive up to $50,000 in student debt owed by households who earn less than $100,000 in income while offering smaller student debt forgiveness to households earning between $100,000 and $250,000. The plan also would make every public two-year and four-year college in the country tuition-free, increase Pell Grant funding by $100 billion, and create a fund to support historically black colleges and universities (HBCUs). Combined, this plan would cost $1.25 trillion over the next decade.

Warren’s child-care plan has several planks: providing universal pre-K, funding childcare for all, and raising childcare worker wages. Specifically, the plan would have the federal government work with state and local governments to create a network of free child care centers, preschool, and in-home care options, while raising child care worker wages to those of comparable public school teachers. This combination of proposals will cost roughly $1.7 trillion over the next decade, according to an analysis from Moody’s.

Warren also mentioned a plan to raise teacher pay on top of these other proposals. The Massachusetts senator hasn’t released a policy on raising teacher pay specifically, so let’s instead look at plans from fellow Democratic candidates Julian Castro and Sen. Kamala Harris (D–Calif.). Harris’s plan to raise average annual teacher pay by $13,500 would cost $315 billion over the next 10 years, according to the Harris campaign. I reached out to the Warren campaign to see if they had a cost estimate for their teacher pay plan, but the campaign has yet to respond. I will update this post if the campaign gets back to me, and in the meantime, I used $315 billion as an approximation.

Taken altogether, Warren’s proposals would cost $3.265 billion over the next decade, compared to the $2.75 trillion raised by the wealth tax. That means a wealth tax isn’t enough to fund these programs. But that’s a common theme among Democratic policy proposals released thus far. Sen. Bernie Sanders (I–Vt.) offered $15 trillion in tax increases to fund Medicare for All, which is estimated to cost $32 trillion. And it’s not just Democrats: Republicans passed a roughly $1.5 trillion dollar tax cut without any compensating spending cuts.

What’s more, economists have questioned whether $2.75 trillion is an accurate estimate of wealth tax revenue. Former Clinton administration Treasury Secretary Larry Summers called into question Saez and Zucman’s estimate, arguing that they dramatically underestimate the enforcement problems with a wealth tax, and said the tax might raise only 40 percent of that projection. The University of Chicago Booth School of Business polled economic experts and found that 73 percent either agreed or strongly agreed that the wealth tax would pose significantly more enforcement challenges than existing taxes due to difficulties of measuring net worth.

European countries have moved away from wealth taxes—12 countries had wealth taxes in 1990, while only four did by 2017. Before those taxes were abolished, they played a minimal role in revenue generation. These countries recognized that the wealth tax poses real economic problems. They treat personal wealth, like a mansion, the same as productive business investments like factories or tools, which impedes both enforcement and economic growth. 

The bottom line is that Warren can’t pay for all the things she’s promising.

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A Quiet Revolution Is Brewing

Authored by Charles Hugh Smith via OfTwoMinds blog,

Politics as practiced in a bygone era of stability no longer offers any solutions to these profound disruptions.

I recently read a fascinating history of the social, political and economic context of the American Revolution: The Radicalism of the American Revolution by Gordon Wood.

What is particularly striking is the critical role played by rapid social changes in the mid-1700s. Conventional histories focus on the political context, but more important were the changes in family and social relations, and the social impact of the economy moving from quasi-feudal forms of patronage that were ultimately personal relationships to impersonal market forces.

It was these social changes that nurtured the revolutionary zeal of the average (non-elite) male citizen.

Boiled down to its essence, Americans came to appreciate the precariousness of their prosperity, and this led to a deep split in the populace. Between 30% and 40% of the populace remained loyal to the British Crown/King, and these Loyalists reckoned it a political and economic disaster to separate from the “Mother Country.”

The majority felt the exact opposite: their prosperity and liberties were all too easily snatched away by a Parliament and/or a Monarch who had little to no regard for their prosperity or liberties.

The precariousness of the relatively widely distributed prosperity and political liberties drove average people into an all-or-nothing choice: there was no middle ground, and the bitterness of the divide was life-changing. Benjamin Franklin, for example, completely cut off his eldest son when the son remained a Loyalist, despite the decades of affectionate intimacy they’d shared.

Such prosperity and liberties that existed were reserved for Caucasian males, of course; women had the right to divorce and own property but no political suffrage, and slaves had no rights unless they were freed by their owners.

The social changes in the family and economy Wood describes are of especially keen interest, as they mirror the present era in so many ways. Parents in the 1760s were admonished to treat their children as individuals and to use reason rather than punishment. Parental authority was thus reduced from rigid authoritarianism to a much more nuanced and difficult process of nurturing and guidance–a process familiar to every parent today.

The economy was changing rapidly as well, as the lines of authority that were once personal became market-contractual. Where small farmers in the early 1700s sold their harvests to upper-class planters or merchants (i.e. the gentry), by mid-century Scottish trading houses were buying small farmers’ harvests directly, requiring written contracts rather than personal trust.

Small farmers made more money, and the landed gentry lost power over the flow of goods.

This disruption of traditional authority stretched from the home to the marketplace and ultimately to the British Crown and Parliament, which saw the rebellious colonists as wayward children who deserved a good lashing to set them straight.

All of which brings us to the present, when once again profound social, political and economic forces are changing the nation in ways that are difficult to understand in real time. Traditional authority is weakening, and traditional markets are being disrupted, leaving most participants far more financially precarious than they were a few decades ago.

To take one important example: where owning a home once meant counting in slow and steady appreciation of home equity, in today’s bubble-and-bust economy, timing is everything: poor timing can trigger the loss of one’s down payment and equity, and to capture that equity requires selling at the top.

As I noted in recent blog posts, politics as practiced in a bygone era of stability no longer offers any solutions to these profound disruptions. Middle ground has vanished because there is no middle ground, and ideologies have become quasi-religious because they no longer offer any practical guidance to the economy that is still being transformed by the 4th Industrial Revolution.

Once again Americans are awakening to the precariousness of their prosperity and liberties, and traditional forms of belonging, loyalty and authority are unraveling. As the pie shrinks, the struggle to maintain one’s own share at the expense of others becomes Darwinian, and so it’s no surprise that finance and politics are increasingly becoming winner-take-all or winner-take-most zero-sum endeavors.

A quiet revolution is brewing as the old social, political and economic structures fail. The politics of compromise is giving way to the politics of borrowing whatever sums are needed to placate every elite and every constituency. This is the pathway to financial debauchery as the currency will be destroyed by the politics of expediency.

New social, political and economic structures will arise that are stable because they reflect new realities. “Politics as usual” failed in 1765 and it’s failing now.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

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Elizabeth Warren’s Budget Math Still Doesn’t Work

On the campaign trail, Sen. Elizabeth Warren (D–Mass.) is promising voters that she “has a plan for that“—no matter what “that” is.

But her plans don’t add up.

Take Warren’s appearance last week on The View, where she overestimated the number of programs she could fund with her proposed wealth tax of 2 percent on personal net worth over $50 million dollars and 3 percent on net worth over $1 billion. Warren name-checked her student loan forgiveness and tuition-free college plan, her childcare plan, and a proposal to increase teacher pay as programs she’d fund with the wealth tax.  

According to University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman, Warren’s wealth tax would raise $2.75 trillion dollars over the next decade.

Warren’s student loan forgiveness and tuition-free college plan would forgive up to $50,000 in student debt owed by households who earn less than $100,000 in income while offering smaller student debt forgiveness to households earning between $100,000 and $250,000. The plan also would make every public two-year and four-year college in the country tuition-free, increase Pell Grant funding by $100 billion, and create a fund to support historically black colleges and universities (HBCUs). Combined, this plan would cost $1.25 trillion over the next decade.

Warren’s child-care plan has several planks: providing universal pre-K, funding childcare for all, and raising childcare worker wages. Specifically, the plan would have the federal government work with state and local governments to create a network of free child care centers, preschool, and in-home care options, while raising child care worker wages to those of comparable public school teachers. This combination of proposals will cost roughly $1.7 trillion over the next decade, according to an analysis from Moody’s.

Warren also mentioned a plan to raise teacher pay on top of these other proposals. The Massachusetts senator hasn’t released a policy on raising teacher pay specifically, so let’s instead look at plans from fellow Democratic candidates Julian Castro and Sen. Kamala Harris (D–Calif.). Harris’s plan to raise average annual teacher pay by $13,500 would cost $315 billion over the next 10 years, according to the Harris campaign. I reached out to the Warren campaign to see if they had a cost estimate for their teacher pay plan, but the campaign has yet to respond. I will update this post if the campaign gets back to me, and in the meantime, I used $315 billion as an approximation.

Taken altogether, Warren’s proposals would cost $3.265 billion over the next decade, compared to the $2.75 trillion raised by the wealth tax. That means a wealth tax isn’t enough to fund these programs. But that’s a common theme among Democratic policy proposals released thus far. Sen. Bernie Sanders (I–Vt.) offered $15 trillion in tax increases to fund Medicare for All, which is estimated to cost $32 trillion. And it’s not just Democrats: Republicans passed a roughly $1.5 trillion dollar tax cut without any compensating spending cuts.

What’s more, economists have questioned whether $2.75 trillion is an accurate estimate of wealth tax revenue. Former Clinton administration Treasury Secretary Larry Summers called into question Saez and Zucman’s estimate, arguing that they dramatically underestimate the enforcement problems with a wealth tax, and said the tax might raise only 40 percent of that projection. The University of Chicago Booth School of Business polled economic experts and found that 73 percent either agreed or strongly agreed that the wealth tax would pose significantly more enforcement challenges than existing taxes due to difficulties of measuring net worth.

European countries have moved away from wealth taxes—12 countries had wealth taxes in 1990, while only four did by 2017. Before those taxes were abolished, they played a minimal role in revenue generation. These countries recognized that the wealth tax poses real economic problems. They treat personal wealth, like a mansion, the same as productive business investments like factories or tools, which impedes both enforcement and economic growth. 

The bottom line is that Warren can’t pay for all the things she’s promising.

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The Man Who Lost $35 Billion In One Year Compares His Failed Business To Tesla

Eike Batista was once known as the richest person in Brazil and for telling Mexican billionaire Carlos Slim to “watch out” because he was poised to surpass him as the world’s wealthiest person. Nowadays, he is best known as “the guy who lost $35 billion in a single year”, despite the fact that he is now trying to stage a comeback, according to Bloomberg.

Notably, in an interview with Bloomberg, he offered some advice for Elon Musk, comparing Tesla to his failed company, OGX, which eventually went bust under a mountain of debt. OGX had promised greater sales than it delivered and eventually crumbled under its debt load.

“Elon Musk is suffering from this right now,” Batista said.

Batista says that the sudden downfall of his oil company offers a cautionary tale for Tesla investors. Both men were known for attacking short-sellers and both men were well known for making market moving announcements on social media. Additionally, just like Musk, Batista came under scrutiny from regulators for doing so – Brazil’s securities commission this week banned Batista from running a publicly traded company for seven years and issued him a $132 million fine.

The two have a personal relationship that includes Batista “assisting with Musk’s social agenda” when Musk was  in Rio. “I helped him to go to some parties,” Batista said.

And just as Tesla risks being relegated to a niche player in autos, OGX still exists as a minor producer. But Batista’s biggest concern at Tesla is, oddly, the quality of the interior of the vehicles. It’s surprisingly an angle that short-sellers haven’t really dwelled on too much. 

You can choose a Mercedes, Audi, or Jaguar that are cheaper than his SUVs, and you sit in there and see the interior; you can’t compete! If you don’t correct this, you fall behind,” Batista said of Tesla’s interiors. 

Tesla is reportedly preparing a revamp of its Model S that will include higher-end seats.

Batista doesn’t see Tesla bringing down Musk’s other companies, and he credits Musk for already “altering the course of history”. Batista said: “He provoked a beautiful and massive move toward change. We are perfectionists, we are nation-builders.”

As for his own personal business plans, Batista says he is looking forward and not worried about the past.

He concluded: “The difficulty is for people to understand that my relation to money is very different. I didn’t mind breaking my empire. You can’t let projects of that scale stop; if it stops for 2, 3, 4 years, sometimes you can’t catch up.”

Sounds like a great excuse for a business failing – maybe Musk will borrow it if he finds himself in Batista’s shoes. 

via ZeroHedge News http://bit.ly/2WEHQcB Tyler Durden